Even though its commercial real estate lending business is comparatively flat, Fifth Third Bancorp (FITB) bank is seeing higher net revenue from the residential side of mortgage banking. Mortgage banking net revenue was $162 million in the second quarter of 2011, a 58% increase from the first quarter of 2011 and a 42% increase from the second quarter of 2010. The bank’s profit was $328 million, or 35 cents per share, compared to 2Q10 net income of $130 million or 16 cents per share. “Fifth Third’s second-quarter results were strong and reflected continued improvement in credit trends,” said Kevin Kabat, CEO of Fifth Third. “Bottom-line results were the best Fifth Third has generated since 2007 and drove strong returns — a 1.2% return on assets, a 14% return on average tangible common equity, and 4% unannualized sequential growth in tangible book value per share.” Second-quarter 2011 mortgage originations were $3.1 billion, a decrease from $3.9 billion in the previous quarter and $3.8 billion in the second quarter of 2010. Second-quarter 2011 originations resulted in gains of $64 million on mortgages sold compared with gains of $62 million during the previous quarter and $89 million during the second quarter of 2010. On the commercial side, by comparison, loan and lease balances were up $160 million sequentially and declined $761 million or 2 percent from the second quarter of 2010. Commercial and industrial loans increased 2% sequentially and 7% compared with the second quarter of 2010. Average commercial mortgage and commercial construction loan balances declined by a combined 3% sequentially and 17% from the same period the previous year, reflecting continued low customer demand and tighter underwriting standards. Mortgage servicing fees remained flat for the last 12 months, including mortgage servicing rights amortization and related valuation adjustments. These net servicing asset valuation adjustments were positive $40 million in the second quarter of 2011 compared to negative $29 million in the second quarter of 2010. The mortgage-servicing asset, net of the valuation reserve, was $847 million at quarter end on a servicing portfolio of $56 billion. Write to Jacob Gaffney. Follow him on Twitter @jacobgaffney.

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